Capitalism, Capitalism

Wood 2002, p. 2 Obrinsky (1983) p.1 In a capitalist system (also known as a market economy), investments, distribution, income, production, pricing and supply of goods, commodities and services are determined by voluntary private decisions. Bacher (2007) p. 2; De George (1986) pp.104, 111; Lash (2000) p.36 A distinguishing feature of capitalism is that each person owns his or her own labor, and is therefore allowed to sell the use of it to employers. Wood 2002, p. 2 In a capitalist state, private rights and property relations are protected by the rule of law of a limited regulatory framework.

Sombart's close friend and colleague, Max Weber, also used capitalism in his 1904 book The Protestant Ethic and the Spirit of Capitalism ( Die protestantische Ethik und der Geist des Kapitalismus ).

Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008. p. 12 With mercantilism, the competitive nature means there are always winners and losers, and this is clearly evident as feudalism transitions into mercantilism.

Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008. p. 12 Among the major tenets of mercantilist theory was bullionism, a doctrine stressing the importance of accumulating precious metals. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsides, such as the granting of monopolies and protective tariffs, were necessary to encourage home production of manufactured goods. European merchants, backed by state controls, subsidies, and monopolies, made most of their profits from the buying and selling of goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices" Quoted in Sir George Clark, The Seventeenth Century (New York: Oxford University Pres, 1961), p. 24.

According to Marxists, it was made possible by the exploitation of wage-labor on a large scale, which English landowners first experimented with after the crisis of the 14th century. According to World Systems Theorists like Immanuel Wallerstein, it was made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism.

Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.

In particular, the Long Depression of the 1870s and 1880s and the Great Depression of the 1930s affected almost the entire capitalist world, and generated discussion about capitalisms long-term survival prospects. In the early 20th century, a succession of U.S. Presidents, beginning with Warren Harding's "Return to Normalcy," the state decreased taxation rates, with the Revenue Act of 1924 and 1926.

Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008.

Smith devised a set of concepts that remain strongly associated with capitalism today, particularly his theory of the "invisible hand" of the market, through which the pursuit of individual self-interest unintentionally produces a collective good for society. It was necessary for Smith to be so forceful in his argument in favor of free markets because he had to overcome the popular mercantilist sentiment of the time period. Degen, Robert.

The Communist Manifesto "To Marx, the problem of reconstituting society did not arise from some prescription, motivated by his personal predilections; it followed, as an iron-clad historical necessity on the one hand, from the productive forces grown to powerful maturity; on the other, from the impossibility further to organize these forces according to the will of the law of value." - Leon Trotsky, "Marxism in our Time", 1939 (Inevitability of Socialism) [5] Following Adam Smith, Marx distinguished the use value of commodities from their exchange value in the market. Capital, according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of labor power had itself become a commodity under capitalism; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist. This difference in values, he argues, constitutes surplus value, which the capitalists extract and accumulate. In his book Capital , Marx argues that the capitalist mode of production is distinguished by how the owners of capital extract this surplus from workers all prior class societies had extracted surplus labor, but capitalism was new in doing so via the sale-value of produced commodities.

However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is extracted , even if this surplus is not produced by capitalist activity, as when an absolute majority of the population is engaged in non-capitalist economic activity.

It emphasizes the legal foundations of capitalism (see John R. Commons) and the evolutionary, habituated, and volitional processes by which institutions are erected and then changed (see John Dewey, Thorstein Veblen, and Daniel Bromley.) One key figure in institutional economics was Thorstein Veblen who in his book The Theory of the Leisure Class (1899) analyzed the motivations of wealthy people in capitalism who conspicuously consumed their riches as a way of demonstrating success. The concept of conspicuous consumption was in direct contradiction to the neoclassical view that capitalism was efficient. In The Theory of Business Enterprise (1904) Veblen distinguished the motivations of industrial production for people to use things from business motivations that used, or misused, industrial infrastructure for profit, arguing that the former is often hindered because businesses pursue the latter. Output and technological advance are restricted by business practices and the creation of monopolies. Businesses protect their existing capital investments and employ excessive credit, leading to depressions and increasing military expenditure and war through business control of political power.

Mises and Hayek argued that only market capitalism could manage a complex, modern economy. Since a modern economy produces such a large array of distinct goods and services, and consists of such a large array of consumers and enterprises, asserted Mises and Hayek, the information problems facing any other form of economic organization other than market capitalism would exceed its capacity to handle information. Thinkers within Supply-side economics built on the work of the Austrian School, and particularly emphasize Say's Law: "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers.

Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by Friedrich Hayek and John Maynard Keynes, both of whom believed that capitalism is vital for freedom to survive and thrive.

Indian philosopher P.R. Sarkar, founder of the Ananda Marga movement, developed the Law of Social Cycle to identify the problems of capitalism and proposed the Progressive Utilization Theory (PROUT) as a solution to its ills.

A number of Marxian economists have argued that the Enclosure Acts in England, and similar legislation elsewhere, were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.

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